Following the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry all boards should reflect on their governance systems and practices and how they can be improved.

The report highlighted the core tenets of governance by making it clear that boards and their “gatekeeper committees” should:

  • Sufficiently challenge Management;
  • Do everything possible to satisfy themselves that they are receiving the right information from Management in order to make effective, often complex decisions;
  • Assess, monitor and measure corporate culture and governance; and
  • Provide rigorous oversight of risk, including non-financial risks.

Commissioner Kenneth Hayne observed that:

  • “Often, improving the quality of information given to boards will require giving directors less material and more information;
  • Boards and management must keep considering how to present information about the right issues, in the right way;
  • Boards cannot, and must not, involve themselves in the day-to-day management of the corporation. Nothing in this Report should be taken to suggest that they should; and
  • The task of the board is overall superintendence of the company, not its day-to-day management. But an integral part of that task is being able and willing to challenge management on key issues, and doing that whenever necessary”.

Further, Commissioner Hayne emphasised the importance of Board constituency:

“Matters of board composition are not best dealt with by prescriptive rules regarding board numbers or composition, instead such rules would distract from the basic requirement of ensuring that the board, is as far as possible, constituted, at all times, by directors, who, together, will form a skilled and efficient board”.

  • The Report also made key recommendations in relation to culture and governance, namely a board should:
  • Assess the entity’s culture and its governance;
  • Identify any problems with that culture and governance;
  • Deal with those problems; and
  • Determine whether the changes it has made have been effective.